S Corporation Distributions Dear Tax Guru,
Please help me understand the logic behind the following
Why do the distribution from an S Corporation HAVE to be pro rata? The shareholders are already taxed on their share of the profits . Shouldnt they have a right to withdraw their investment in the proportion they please without having to worry about whether the other shareholders may/maynot want a distribution at the same time? I have been told that it is because uneven distributions would indicate more than one class of shares..but why cant the shareholders withdraw it in the form of return of capital invested instead of a distrbution?
Help! |